Published 4:00 am, Wednesday, December 13, 2006

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�** FILE ** Apple Computer customer walks into an Apple store in Palo Alto, Calif., Tuesday, May 6, 2003, passing a display of music albums for Applie's new iTunes Music Store. Apple Computer Inc. faces a serious challenge in France, where lawmakers have moved to sever the umbilical cord between its iPod player and iTunes online music store _ threatening its lucrative hold on both markets, Friday, March 17, 2006. (AP Photo/Paul Sakuma)Ran on: 03-18-2006 Apple's online music sales face a challenge in France, where lawmakers want the service to work with any player, not just iPods. Ran on: 07-14-2006 ITunes ads are all over the Apple Store in Palo Alto. An iPod that helped break iTunes' encryption technology sold recently. TUESDAY, MAY 6, 2003 FILE PHOTO less

�** FILE ** Apple Computer customer walks into an Apple store in Palo Alto, Calif., Tuesday, May 6, 2003, passing a display of music albums for Applie's new iTunes Music Store. Apple Computer Inc. faces a ... more

Even as consumers buy more and more iPods, they are purchasing only a handful of songs from Apple Computer Inc.'s iTunes online store, a Forrester Research report said.

In a study of the online store, technology research company Forrester estimated that its monthly revenue, after rising for the past two years, has fallen 65 percent since January, when sales spiked most likely because people who received iPods for the holidays began filling them up with music.

Forrester concluded that most households buy less than two CDs worth of iTunes music. And in adding up all the songs sold on iTunes -- about 1.5 billion -- and all the iPods sold -- about 60 million to 70 million to date -- it breaks down to about 20 iTunes tracks sold per iPod, Forrester said. In recent months, that has increased to 23 songs per iPod.

The data suggest that although the iTunes store has become the most popular source for online legal music, it hasn't generated enough sales to make up for the billions of dollars the recording industry has lost in recent years with the slowdown in CD sales and music piracy.

"People who thought that iTunes would save the music business now have to sober up and realize that's not true," said Josh Bernoff, the author of the study and a principal analyst at Forrester. "Twenty songs per iPod are not enough to save the industry."

Apple spokeswoman Natalie Kerris disputed that sales have slowed. "The conclusion that iTunes sales are slowing is simply incorrect," she said.

ITunes is tied with Amazon as the fourth-largest music retailer, behind Wal-Mart, Best Buy and Target. It represents nearly 6 percent of all music sold in the United States, Apple said, citing statistics compiled by the NPD Group, a market research company.

Apple does not break out revenue figures for its iTunes sales. But for the most recent quarter, which ended Sept. 30, it made nearly $1.6 billion in iPod revenue and $452 million in revenue from its iTunes store, iPod accessories and other iPod-related services. It sells music downloads for 99 cents each, as well as television shows for $1.99 and, most recently, movies for between $9.99 and $14.99 each.

And although Apple may not be selling as many songs as it or the music labels may like, it is certainly turning a profit from its iPod sales, which account for some 75 percent of the MP3 player market, according to the NPD Group.

The iTunes store "is part of the overall iPod experience, but ultimately they make money selling iPods," said Tim Bajarin of Creative Strategies, a technology research company.

Forrester analyzed credit and debit card transactions between April 2004 and June 2006 for the study. It did not include purchases made from gift cards, which it concluded did not make a difference in its main findings.

It reported that the top 34 percent of homes buying iTunes music accounted for 80 percent of iTunes revenue. It also estimated that just about 3 percent of all homes bought a song from iTunes in the past year. The median transaction was three songs for $2.97, with one-third of all transactions amounting to $1.08 or less. And consumers dolled out on average $35 at iTunes during the past year, Forrester said.

In a separate and broader survey, Akamai noted that 90 percent of its respondents said they bought one song per week from online stores industrywide. It said 76 percent spent $1 to $5 on music downloads per week.

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